Networking, Supply Chain Issues Dull Apple's Shine

Apple's Supply Chain Put to the Test

In late May 2008, AMR Research proclaimed Apple's supply chain and digital distribution channels as tops in the world. The iconic Mac, iPod and iPhone maker took the number-one spot due to "an intoxicating mix of brilliant industrial design, transcendent software interfaces and consumable goods that are purely digital," gushed the AMR analysts in the report ranking the world's top 25 supply chains.

The analysts saluted Apple's efforts with the original iPhone's introduction to the marketplace in 2007, noting that "Apple could have stumbled meeting demand or failed on quality. It did neither."

Just about a month and a half after AMR published its report, Apple's vaunted supply chain and networks stumbled and failed under the crush of a complex and multiproduct rollout, beginning on July 11. Apple Stores quickly ran out of the 3Gs, lines soon elongated and problems with the iPhone's activation process through iTunes frustrated thousands at Apple stores, whose associates began sending customers home to activate their new bricks and also for those who were trying to upgrade to the 2.0 software.

"When the iTunes activation server went down on Friday morning, Apple violated the cardinal rule: first, do no harm," noted analysts at market research CurrentAnalysis in an Apple report. "Problems with the activation process were inexcusable."

Apple's MobileMe e-mail launch on the same day was "fraught with problems, including large initial downtime, an extended e-mail outage including lost messages, the inability to contact the service to sync, corruption of data, time delays in syncing the computer to MobileMe and more," reported the Macworld article. The "launch of MobileMe was not our finest hour," Jobs wrote to the Apple troops. (For more on MobileMe and the enterprise, see "Apple's MobileMe, Designed for Consumers, Could Be Potential Headache for IT Managers.")

To Gartner's Dulaney, some of Apple's troubles were self-inflicted but, to a degree, a bit out of executives' and supply chain planners' control. "Apple has always made great products, and they always expect to be phenomenally successful at launch, but I think the appetite in the public for this kind of product is probably surprising," he says. "It probably got away from them."

Historically, notes the AMR supply chain report, Apple has had a reputation for poor supply chain performance and was, at times, unable to handle the demands of its rabid fan base, falling back on their "forgiveness for mistakes."

But that, according to the analysts, was all supposed to have changed.